Indian rupee set to hold near 90 with shaky sentiment, flows overshadowing dollar dip
- The 1-month non-deliverable forward indicated the rupee will open in the 89.86-89.92 range versus the US dollar, having weakened 0.4% on Tuesday to 89.87
MUMBAI: The Indian rupee is expected to remain near the 90 per dollar level at open on Wednesday, with fragile sentiment and skewed flows likely to overshadow any relief from a softer US currency.
The 1-month non-deliverable forward indicated the rupee will open in the 89.86-89.92 range versus the US dollar, having weakened 0.4% on Tuesday to 89.87.
The currency dipped to a record low of 89.9475 on Tuesday, and inched past the 90 mark on the interbank order-matching system after the usual market hours for spot trading.
Tuesday’s decline marked a fifth straight day of weakness, a retreat that’s unfolded despite regular intervention by the Reserve Bank of India.
The rupee’s slip past 88.80, a level the RBI had defended for weeks, has effectively “stripped away what had become a psychological and technical anchor for the market” and opened the door for more weakness, a currency trader at a private sector bank said.
Moving past that threshold has left the rupee more vulnerable to factors that have for long been weighing on it in the background, he said, pointing to softness in capital flows, persistent importer demand and more recently, a pickup in speculative positions.
The slump in capital flows is evident in India’s balance of payments data for the September quarter. Net capital flows fell to just $0.6 billion, from $8 billion in the previous quarter.
Comments
Comments are closed for this article.